Cipla Case

Aman P39121, Chittesh P39131, Munish 39145, Saransh P39162, Shivani P39166, Yuvraj P39177

Executive Summary

Dr. Yusuf Hamied, CEO Chemical, Industrial and Pharmaceutical Laboratory (CIPLA) needs
to come up with an action plan so that he is able to ensure the sustainable growth of his
organization. The political and business scenario of the pharmaceutical sector is changing
rapidly. He needs to ensure that this action plan needs to be applicable in minimal time and
effort, has to remain close with the central philosophy and values of the company, and also
should not be taxing on the finances of the company. CIPLA can take advantage of the latitudes
of interpreting the agreement in India using their political connections so that they can genetrate

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profits and also they may try to shift their business more towards the developed countries.

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Situation Analysis

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Dr. Yusuf Hamied, CEO Chemical, Industrial and Pharmaceutical Laboratory (CIPLA) seems
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to be a great man with a greater responsibility. Admittedly, he has pioneered inexpens ive
antiretroviral medicines to Indian middle and lower class patients. He seems to understand his
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position and responsibilities towards the society and claims to be driven not only by profits but
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by service and sustainable development.

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The pharmaceutical sector is on a vantage point where it is highly polarized between activists
and developing countries are on hand and the profit seeking western MNCs refuse to budge to
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the humanitarian demands. The activists and developing countries are beginning to voice their
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concerns against the draconian amounts of profit that big pharmaceuticals are seeking. MNCs
seem to be forcing governments of developing countries to comply with the terms and
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conditions of World Trade Organization(WTO)’s Trade Related Aspects of Intellectua ls

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Property Rights (TRIPS).

Although Mr. Yusuf is being glorified and portrayed as a true servant to the society who is not
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at all driven by profits but if we think strictly on business lines and ethics his employed process
of reverse engineering and creating generics is not completely ethical. If we put ourselves in
the shoes of western MNCs we may feel that Yusuf is pirating the R&D efforts of these
companies. In turn his business practices are having a negative effect that these MNCs are not
able to invest more in R&D due to Yusuf’s pricing policies and they have to invest more in
advertising which in turn is harming more to the society.

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 Problem Statement:

The problem seems to be three-pronged where at first CIPLA has to continue serving on the
humanitarian grounds, not change its operations drastically and weather the storm of MNCs
and TRIPS.

Objective:

The objective of the case is to create an actionable plan for CIPLA and Dr. Yusuf that should
help them sustain and compete in the market.

1. To ensure the survival of CIPLA even if TRIPS is applied all over the world
2. To provide affordable medicine to everyone, serving not only Indian population but
also to the least developed countries.

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3. To remove the myths and taboos in the society that are prevalent not only in the low

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income groups but also among the well-educated: doctors.

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4. To make a social change and create a healthy environment where people are not

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ashamed to disclose their health issues.
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5. To protect the interests of CIPLA and safeguard its profits and to make sustainab le
profits for the investors.
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6. To have enough funds to carry out R&D and to accommodate the changes required to
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ensure the growth despite the change in the market scenario.

Criteria:
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1. Minimum application time:

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The solution should be not only be sustainable but should be swift and easy to adopt. It
should require minimum efforts, provide proper relief, and safeguard the interests of
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stakeholders of the company. It should not be the case that the adopted solution takes a
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lot of time to implement or have an effect as external forces are involved.

2. Resemblance with philanthropic philosophy
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The solution should allow CIPLA to continue serving the society and provide patients
with affordable medicines. It should also enable CIPLA to generate enough revenue
that it can sustain its operations as well as continue some R&D and run some
educational and awareness programs, campaigns, and advertisements. The solutio n
adopted should also allow CIPLA to maintain its crusade against the big pharmaceutic a l

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 giants as ‘Robin Hood’ of the pharmaceutical sector and they should continue taking
from the rich and giving to the poor.
3. Financial feasibility
Considering the low profits of CIPLA as compared to other pharmaceuticals, the
proposed solution should be financially feasible and should allow CIPLA to remain
competitive in the market.
4. Minimal deviation from the core ethics and values
The proposed solution should allow CIPLA to operate as close as possible to its core
values of providing service to patients at a fair cost. The goodwill of the company
should remain intact and their brand value should continue to be taken in high regards.
5. Improvement of market base:

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Even though CIPLA is claiming to be a ‘saint’ but they still are a company and are not

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beyond the governing laws of economics and so in order to maintain the low cost the

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proposed solution should also look into increasing the market base as that would enable

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them to keep their prices low.
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Plausible Solutions:

1. Maximize profits and improve business practices:

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Since, 40% ownership of the company is with the Yusuf Hamied’s friends and family
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so his focus may shift towards maximizing their profits through the production of
generics and selling them on a relatively higher margin in to generate enough profits to
spend a proportion of Ciplas revenue towards R&D.
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2. File a case in WTO against TRIPS:

To safeguard the interest of the LDC, particularly those areas that are most affected by
AIDS, along with the NGOs and institutions like ‘medicines sans 3rontiers’ a case
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might be filed in WTO as a delaying tactic against TRIPS in order to ensure that CIPLA
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has enough time to accommodate any significant change in its policies or to find a way
out.
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3. Government Intervention:
After the implementation of TRIPS the main issue that CIPLA will face is that of
investment in R&D activities. As given in the case, in the time of this distress US
government invested heavily in the AIDS pharmaceutical research and also bared 1/3
of the cost of clinical trials in addition to this they also shortened the time for the
approvals. So, pharmaceutical lobby including Indian drug manufacturers’ Associatio n,

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 along with, can also demand the Indian government for a similar type of support since
CIPLA has been in the fore front of providing help to the government in the time of
distress.
4. Increase sales of medicines in developed countries
Currently, CIPLA targets Indian market and follows a pricing policy focusing on the
buying capacity of the consumers. CIPLA can now focus more on increasing the sales
in US and Europe where they can increase marginal profits and still provide competitive
profits as the established and the incumbent companies provide drugs at a high price.
5. Collaborate with MNCs:
If CIPLA feels that they can’t stop TRIPS then they can also try to collaborate with the
MNCs to sell medicines. As they have a strong distribution centres in place so they can

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provide a quick access to the Indian market and they can also provide the company the

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tag of brand name ‘CIPLA’ since there is a lot of goodwill for CIPLA in the market.

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6. Take advantage of the latitudes of interpreting the agreement:

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Dr. Yusuf carried a tradition of political involvement and supported the growth of
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national sector pharmaceutical companies. So CIPLA can lobby with the ministers to
either abdicate the adoption of TRIPS or delay its implementation or add a loophole
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that may allow CIPLA to operate at its existing prices claiming that it provides
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medicines at affordable rate. It has been explicitly stated that Mr. Yusuf was a wealthy
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and a powerful man in India. If anyone has a chance of convincing the politicians, he
does.
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Evaluation of alternatives:
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As CIPLA claims to have never bothered about profitability so solutions such as aiming for
double digit profits and investing a substantially large amount in R&D to seek high profits is
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out of the question. International political solutions and collaborations are highly volatile and
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may or may not happen as CIPLA is not seen in high regards in the international community
especially in the pharmaceutical sector due to its pricing policies so solutions like fighting a
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case against MNCs in WTO and collaborating with the MNCs are not very bankable solutio ns
as it depends on external agents. So, solutions like shifting the market base to USA and Europe
and other developed countries and taking advantage of the latitudes of the adoption of the
agreement seem to be the feasible choices.

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 Solution:

Though lobbying and use of personal influence is supposed to be unethical, but only in an ideal
world. Using your power to get your way is a norm in the society. In CIPLA’s case, this
influence can be used for the greater good which negates the unethical aspect of it. As
mentioned, there are certain loopholes in the adoption of the TRIPS agreement. One such
loophole is ‘failure to work the patent’. As per this, a patent holder would lose the right to sell
the medicine if he is not able to provide an affordable product to the citizens of the country.
The good thing about this loophole is that CIPLA has been working on this very premise since
its inception. Since there are around 39,70,000 patients that are infected with AIDS only 13,000
are using anti-retroviral therapy (ART). This can be perceived as a man-made epidemic as it is
due to the shame attached with the diagnosis of diseases like AIDS and doctors are not ready

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to prescribe medicines as they feel that this will inhibit prevention. Another condition that

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makes it conducive for CIPLA to take advantage of this loophole is that the per capita income

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of India is only $350 which is the lowest in the world. This in turn makes it very difficult for

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western patent holders to make their pharmaceutical products available at affordable prices to
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the Indian masses. This alternative also seems to justify the all the criteria on which are
evaluating this case.
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Implementation plan:
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1) Using political connections

CIPLA should try to exploit the existing political conditions to ensure its sustainability and
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growth in the Indian market.

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2) Taking advantage of the goodwill

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CIPLA can also use their goodwill in the market to generate sympathy for their company
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and demonize the incoming foreign companies as Indians have a tendency to see the foreign
interventions in a very negative light
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3) Running an awareness campaign against TRIPS

An awareness campaign against TRIPS can be launched and CIPLA should try to polarize
the situation and show the foreign companies in the bad light as their incoming will surely
raise the prices and make certain medicines less affordable.

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 Contingency Plan:

Boost sales of generic medicines in developed countries

The company should meanwhile prepare to boost their sales in the foreign markets where the
profit margins are high in order to generate enough profits to serve more number of people.
This strategy may also ensure that CIPLA can also increase their market base and their brand
values. As higher margins in USA and developed countries will ensure that they can sell their
medicines at a higher price generating enough dollars to infuse their R&D and operations in
India and across the globe.

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